Friday, May 29, 2009

Bands, LLCs, and Income Taxes

Dear Rich: My band is thinking about forming an LLC and we've been told that one of the reasons to do it is to save on income taxes. This is the first year we're together and we're making a lot of money with corporate gigs so we're looking for any way at all to cut down on taxes. Will an LLC save us money at tax time? I'm so glad you asked. The short answer to your question is, "Probably not." Of course, nobody on the Dear Rich staff is an accountant so we can't be positive about your situation, blah, blah, blah. (Check with your accountant.). But with an odd exception, LLCs are taxed the same way as partnerships and they take the same deductions. So it's hard to see how you will save any dinero on April 15. Not only that, some states, like California, have hefty annual LLC fees. Here's an excerpt from my Music Law book that goes into more detail on the subject.